Ministries reach out to private sector amid tight budgets

The Jakarta Post – Jakarta. With reduced budgets in 207, the Transportation Ministry and Public Works and Public Housing Ministry have once again reiterated their wish to partner with the private sector, with offers of long-term contracts as a solution.

The ministries are among several institutions tasked with carrying out the government’s ambitious infrastructure projects, which are expected to cost Rp 344.6 trillion (US$26.3 billion) next year alone. The objectives include improved air, sea and land connectivity.

The Transportation Ministry will only receive funding of Rp 45.9 trillion in the 2017 state budget, down from the previous expectation of Rp 48.7 trillion, as the state budget remains tight. Transportation Minister Budi Karya Sumadi stated that it would offer long-term contracts to private firms to attract their participation in its programs.

“We will offer long-term contracts to private companies and ask them to buy the buses or ships,” he said recently, adding that state enterprises such as shipping firm Pelayaran Nasional Indonesia (Pelni) might be interested in the offer.

The contracts will reassure the companies that their purchases will not be in vain and provide an assurance for the Transportation Ministry that the buses and ships will be used optimally.

“In the current practice, we sometimes assign ships to third parties, but it turns out they don’t even operate them. Anyway, because we’ve run out of cash, we have to take this kind of measure,” he said.

The Transportation Ministry still has several multiyear procurement projects that will continue as planned, including 15 navigation vessels and 50 pioneering ships.

However, Budi claimed that the long-term contracts and the provision of operational subsidies for the companies would still be a more affordable option for the ministry, as opposed to purchasing all means of transportation by itself.

The budget cuts come amid the government’s efforts to cope with limited revenue.

President Joko “Jokowi” Widodo stated earlier that he wanted next year’s budget to be “realistic” and “more credible”, making it a reliable fiscal instrument to support poverty eradication, a reduction in inequality and the creation of more jobs.

Finance Minister Sri Mulyani has insisted she does not intend to repeat this year’s budgetary mistakes, which forced the government to carry out two rounds of budget cuts in anticipation of a massive tax revenue shortfall of Rp 219 trillion.

The Transportation Ministry’s own budget cut this year has affected some strategic railway projects, including the Madiun-Kedungbanteng double-track project in East Java, which is a part of the trans-Java railway project.

Meanwhile, Public Works and Public Housing Ministry secretary-general Anita Firmanti said that it had attracted the private sector for several projects, but was looking for more.

“We have some toll road and dam projects, in which we see the private sector participating,” she said, citing the Karian dam in Banten as an example. The ministry will only receive Rp 101.5 trillion in next year’s budget, lower than the previous estimate of Rp 105.56 trillion.

The ministry will participate in the upcoming Infrastructure Week, which will take place from Nov. 8 to 11 to lure private firms to invest in government projects.

The projects offered include the $450 billion infrastructure projects to be built by 2019, as contained in the National Mid-Term Development Planning Program (RPJMN).